Tourism and real estate are two highly different industries, which however correlates with one another. Tourism refers to people visiting a certain place of interest during their vacation, where their stay will mostly be short-term.
The correlation between tourism and real estate was noticed during the 90s, where developments combining both elements were introduced. For example, there are integrated developments which include entertainment components such as theme park and malls, that are built together with residential components.
Such developments are mostly known as mixed developments or integrated developments and are still popular among citizens. So what is the obvious impact of tourism on properties that are located within the tourist hotspots?
- Infrastructure upgrade
When a location is well-known as a tourist hotspot, the infrastructures and facilities available in the place will be enhanced and upgraded constantly. The road or highway leading to the destination, public transportation around that area, hotels, restaurants, food and beverages outlets, shopping malls and entertainment centres are among the amenities that will be focused and developed within the location.
Thus, if you own a property in this location, this factor will help to boost your house value as there will be many facilities and amenities that would be deemed convenient by your tenants or potential buyers.
- Desired location
Tourism hotspots are well-known to perform better in terms of real estate, as many people will be aware of the area’s existence due to its popularity. Such places also hold the potential to house many luxury developments, which will eventually make it a highly desirable location for many. The properties located in such areas will be in good demand and this will increase their property value over time.
- Attract expats
Tourists hotspots usually have high-end facilities and amenities which adds up to the convenience of foreigners. Thus, foreigners who reside in our country for long term; widely known as expats; show interest in staying within such locations as they feel closer to home. An example of this is the Penang Island, a famous tourist hotspot in Malaysia which is also adored by expats.
This contributes to the increase in capital and rental value as these expats are willing to overspend for their home rental or property purchase.
- Vacation homes
Short term rental has become a popular trend among backpackers and tourists as it is affordable and convenient at the same time. Even though many prominent hotels and resorts are available in such hotspots, yet with the existence of the internet and other modes of communication, tourists can now easily book a short-term vacation home for a cheaper price.
There are also many websites available such as Booking.com, Agoda.com and so on, where the landlord can advertise their homes online. In some instances, the landlord also allows the visitor to make payment directly after taking a look at the home.
Besides that, some of the residences that are developed together with entertainment components are also managed by the developers themselves. So instead of building hotels, the developers opt to develop residences that are sold to the public, but are leased back to the developers for vacation rental. Such arrangements will mostly come with a Guaranteed Rental Return (GRR) scheme. Hence, most buyers consider such properties as their investment.
So if you’re keen to invest in tourist hotspots, you can consider the above-mentioned points to make a sound decision.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
